Trading, Accounts & Prohibited ActsQuestion 244 of 398
Which of the following is a defining feature of a traditional 401(k) plan?
a.It is an employer-sponsored plan funded largely by pre-tax employee salary deferrals
b.It is a plan that individuals open with any broker with no employer involvement
c.It guarantees a fixed monthly pension based on years of service
d.It can only hold shares of the employer's own stock
Explanation
A 401(k) is an employer-sponsored defined-contribution plan. Employees defer part of their salary (traditionally pre-tax), often with an employer match, and the retirement benefit depends on contributions and investment performance rather than a guaranteed formula.
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